“Financial Inclusion” – The Traditional Way
The traditional meaning of “financial inclusion” is anyone who is a base of the pyramid citizen, and who has access to a no-frills bank account or who is given a micro loan. One needs to break free from the above ‘constrictive definition’, look beyond this periphery and address the real needs of the base of the pyramid citizen, to bring out the real essence of financial inclusion. The base of the pyramid citizen is a person with normal banking needs like you and me but excluded from formal access to the banking channel, maybe due to reasons like

Why are citizens unbanked ??
• Geographical inaccessibility to extend banking services,
• Inability to understand and carry out the banking processes due to illiteracy,
• Meagre surplus due to a hand to mouth existence and hence no motivation to access a banking product.
• Further such citizens are a low value proposition for the traditional brick and mortar banks, given the high volumes and low value of transactions expected from such customers. The attitude of bank staff towards them may also not be conducive enough to motivate them to access a banking channel

Enter!!! A business correspondent (BC)

Complete Solutions
An agency who will have not only the:
• Requisite technology to reach the base of the pyramid citizen, but also,
• Offer a full range of customized banking products and services to such citizens,
• Alongwith the operational web to reach the unbanked citizen .

Here the core concept is that the bank goes to the customer, instead of the customer coming to the bank, thereby inducing some basic banking habits among the base of the pyramid citizen.
Make banking easy and attractive for the unbanked citizen
My experience says that traditionally available banking products and services are not at all attractive to the base of the pyramid citizen. The following table brings out some of this blaring difference, and how we at FINO have actually bridged the gap:

Having a look at the above I would again re-iterate that the banking needs of the base of the pyramid are almost same as us but the means are drastically different.

Paving the way ahead – Look at the Fino way!!
Currently India has a plethora of MFI’s and BC’s engaged in micro-banking activities and all of them are doing a good job. However none of them have achieved a scale comparable to Fino, and neither have the wide array of products and services to offer.
Fino has been a specialist both technology, operations and products too, and a combination of all these is truly essential to get a critical mass of the unbanked and under banked and sustain them.

BC – Bank Partnership
• Banks need to understand that the BC being a specialized agency with feet on the ground, technology and cash management capability, they are well placed to bring the base of the pyramid citizen under the financial inclusion umbrella
• Though the regulator has been from time to time pushing the concept of financial inclusion the onus is on the banks on how aggressive they would be in their strategy to execute the same, and with precision
• Banks need to understand that a BC combines the technological expertise of offline + online banking
• Further for a sustainable model, banks need to compensate the BC adequately (and why not?? considering that if they go all alone to achieve financial inclusion they would have to incur a cost which is almost X times), and allow certain reasonable charges also to be taken from the end customer. Once the model achieves a momentum and scale, it would be a profitable venture both for the BC’s and banks

BC-Investor Partnership
• Banks themselves can serve as investors to a BC
• The private sector and government too needs to come ahead and support the Business Correspondents in their initiatives
• Once the market is tapped and the model of financial inclusion becomes scalable, all the stakeholders would benefit in the form of new revenue channels

I believe Fino has already come a long way ahead in financial inclusion since its inception and is leading the way ahead by being an example to follow.

“Financial Inclusion” – The Modern Way
I would like to replace ‘financial inclusion’ with the term ‘micro-banking’ which means accessibility of all banking products and services by a citizen of India, irrespective of his location and status, and irrespective of the bank. As I said the base of the pyramid citizen is just another person like you and me having a banking need.
I sign off with these thoughts and my microblog!!! Happy Reading!!

This post is the winner of the Blogger of the month contest for the month of July. The author of this post is Nediba Reuben

Having already talked about various technologies available for the e-banking in my previous post. Let me touch on the factors which make e-banking an attractive proposition for the customers

e-Banking: The value proposition
An electronic banking solution must provide sufficient value to persuade the customer to move away from cash. However, cash is an incredibly versatile medium of exchange – it is universally recognized as a store of value, it is accessible, portable and divisible.

So what are the factors that are valued by the customer? These are my top ones:
1. Features (for example, the improved personal safety from having less cash to carry)
2. Acceptability
3. Accessibility of the service
4. Affordability and
5. Ease of use

Features: Many early electronic banking initiatives were designed to reduce the cost of transactions for the financial institution as much as to deliver value to the customer. However, an electronic banking solution can be designed as a low-cost bank account on a card or telephone, with a number of features valuable to customers, such as cash withdrawals and cash-back transactions, deposits, payments and transfers. Added-value services can be provided such as
• loyalty programmes,
• person-to-person transfers,
• airtime top up for mobile phones
• government payments.
Acceptability: Although there may be an age bias in the acceptability of e-banking solutions, practical experience has demonstrated that the bias towards paper-based record keeping in developing markets is far lower than might be expected.

Accessibility: Walking many kilometers to be able to access the service of a bank/ FI is inconvenient and costly for customers, so saturation of an area with the service is preferable to a wider, thinner distribution. E-banking has the potential to provide accessible, convenient financial services because it no longer requires a ‘bricks and mortar’ infrastructure, operated by the permanent staff of a financial institution. E-banking uses an electronic infrastructure and in many cases relies upon third parties to originate transactions. However, partners in an e-banking initiative differ in nature, in location, in accessibility for the poor and in the functionality they are able to provide.

Affordability: Customers on low incomes should find the transactions affordable. Charges need to be designed around a greater volume of low value transactions, probably charging customers a fee per transaction rather than a percentage per transaction, as is the case with Visa and MasterCard.

Ease of use: Systems should be simple to use, fast and user friendly. Service should be standardized so that wherever the solution is used the customer is familiar with the procedure followed.
All of these factors combined collectively swing the customers to either be a part or staying away from any e-banking initiative

Evolution of the financial and retail market

Electronic banking initiatives are more likely to succeed in evolved financial and retail markets. There are a number of reasons for this. Since scale is required to cover costs, the business case for electronic banking in developing countries becomes stronger with the significant fall in the price of ATMs and POS devices and improving communications infrastructure. With scale come a number of advantages:

• When there are a large number of card (or other solution) users in a population the problem of financial illiteracy is significantly reduced since, for example, children teach their parents how to use the card.
• Initial concerns relating to trust are likely to be overcome.
• The case for merchants to hold POS devices improves as the volume of cards in circulation grows.
• Scale increases the case for interoperability and as financial and retailer infrastructure develops, markets become more attractive.

Keep watching this space for more posts by me. Signing off for now. Happy Reading !!

Great News hasn’t stopped yet pouring in for us. FINO which recently received the Global Financial Times “ Banking at the Bottom of the pyramid” Award. Congratulations are pouring from all ends including Hon’ble Minister of State for Finance Shri Namo Narain Meena

After having announced the accomplishment of financially including 1.5 Crore Indians, thereby becoming the largest entity among technology service providers in Financial Inclusion space, FINO organized a conference at Stein Auditorium, Habitat World at IHC, Lodhi Road, New Delhi with Hon’ble Minister of State for Finance, Shri Namo Narain Meena as guest of honor and Deputy Governor, RBI – Dr. K.C Chakrabarty. The conference aims at bringing forth important views and perspectives of all stakeholders in Financial Inclusion segment to generate a meaningful debate, that will help lay down a roadmap to achieve the goal of financial inclusion.

Keynote Address Hon’ble Minister of State for Finance, Govt of India, Shri Namo Narain Meena delivered the keynote address congratulating FINO on their achievement and laid emphasis on Financial Inclusion, Financial Proficiency, sustainable growth and development of the economy.

Welcome Address The welcome address was delivered by FINO, CEO – Manish Khera.

Other Speakers
• FINO chairman - Nachiket Mor,
• IBA chairman- M V Nair
• Reserve Deputy Governor RBI- Dr K C Chakrabarty.

As part of the program, a film on FINO was screened followed by the launch of a book on FINO authored by Mr. Manish Khera.

Says Manish Khera - CEO, FINO, “The huge potential with 500 million unbanked population in India and the support and vision of various banks, insurance and government agencies has enabled FINO to capture 1.5 Crore customers with affordable cost and end-to-end technology system. As a nation we need to continuously challenge ourselves in areas of inclusion and acceptance. Financial literacy is the key to financial inclusion.”

Explaining FINO’s journey, CFO – Rishi Gupta, said since its inception in 2006, FINO has meticulously reached out to the non-banking sectors of the country and has played a pivotal role in strengthening the banking radar of the country. With an army of 11,000 agents (bandhus), FINO reaches clients in more than 21 States, 266 districts and 100,000 villages across the country.

That’s not all we are currently acquiring incrementally over 50,000 customers per day with an average three million transactions per month. By 2011, FINO aims to reach 3 Crore Indians. The company aims to take banking to bottom of the pyramid pan-India. In addition FINO has also been recognized as the world’s largest agent network with more than 11,000 BCs by CGAP.

Recently, FINO has also been chosen as one of the Asia partners to implement the financial education for branchless banking program of Microfinance Opportunities (MFO) and the MasterCard Foundation. Through the partnership, will increase client’s awareness of formal financial services, strengthen demand for and active usage of savings products, promote asset-building and reduce over-indebtedness from local money lenders through various financial literacy programs.

The above 2 pics put across an extremely proud moment for every FINOite.

FINO has been awarded the most coveted Financial Times Sustainable Banking award in the “Banking at the Bottom of the Pyramid” category with 156 entrants from 110 institutions across 44 countries. The awards, organized by the Financial Times and International Finance Corporation (IFC) were announced at a ceremony in London on 3rd June attended by more than 250 senior bankers and industry leaders in the area of sustainability from all over the world.

FINO was bestowed with the “Banking at the Bottom of the Pyramid” following a stringent multi-layered selection process involving a high-level judging panel comprising leading experts in sustainable finance. FINO was the only organization selected from India in this category for providing branchless banking solutions to the unbanked people and bringing a remarkable change in the lives and financial habits of the unreached through its well established BC model.

FINO’s top management first reactions on getting the coveted award

Mr Manish Khera, CEO,FINO Ltd

Extremely delighted on receiving the award, Mr. Manish Khera, said “The award emphasizes the growing importance of sustainability in banking for wider society. Winning it provides welcome international recognition and encouragement for our pioneering role within the banking sector and our successful, transparent and sustainable banking model which has playing a paramount and significant role in Rashtriya Swasthya Bima Yojana, NREGA and other such government initiated programme for financial Inclusion . This recognition will only make us endeavor to raise the bar and do better with every passing year. As a nation we need to continuously challenge ourselves in areas of inclusion and acceptance. Financial literacy is the key to financial inclusion.”

Mr Rishi Gupta, CFO , FINO Ltd

“We are delighted to receive this award. The award stands a testimony to our commitment to financial inclusion of people at the Bottom of the Pyramid. I sincerely appreciate the efforts being put by all financial institutions and banks which are contributing to the mission of financial inclusion along with FINO and have helped it take banking to more than 1.5 crore customers at the base of the pyramid. I hope the collective efforts and energy will make this mission to achieve financial inclusion a resounding success.”

A very proud moment for us at FINO. 3 cheers for us !!

After reaching the 1.5 cr mark as its customer base FINO ltd CEO Mr Manish Khera sent a thank you email to all the FINO employees. Below is the email. It is a very proud moment for all the FINOites and citizens of the country .Below is the excerpts of the email.

“Dear All,
It gives me immense pleasure in sharing with you all that we, TEAM FINO have crossed 15 mn customer base yesterday. Congratulations to all of you for another feather in your cap!!

To put it in perspective, there are an estimated 60 mn BPL households in the country. Since the two large schemes we run (RSBY and NREGS) are both focused on households (infact in RSBY we issue one card per household; even in NREGS the entitlement of 100 days is per household), we have covered 25% of the BPL families in the country.

And we are adding nearly a million customers per month. If you remember, we completed 10 mn customers on January 27, 2010. This year. We are at 15 mn now. In a span of 4.5 months!!! So the day would not be far off when we would have covered the entire BPL families in the country.

We recently got recognition for what we have achieved and the pace at we have achieved and are growing in the form of the FT/IFC award as being the company making the most impact on bottom of pyramid customers, globally.
We all can be proud of our achievement.

We are hosting a function in Delhi on June 15th to celebrate this occasion. The Chief Guest in the function is the Finance Minister, Mr Pranab Mukherjee. The function would also have Deputy Governor RBI, Dr KC Chakraborty and IBA head, Mr M V Nair. It’s a big occasion for us to have such high dignitaries attend our event. A first for us. And while some of us would get the limelight, I wanted to thank each one of you for the hard work that all you have contributed in taking FINO to where it is today.

I am sure in times to come we all would achieve many such milestones and when we look back, this achievement would stand dwarfed. Most important, we all would look back and feel satisfied that not only did we achieve big, we also had fun in the journey and enjoyed each milestone.

Regards
Manish”
CEO FINO Ltd

“For the first time in the history of the world 1.5cr people will rise out of poverty & its our pride that we are not only living in such times but are also associated with it by contributing to this phenomena” Dr K. C. Chakrabarty, Deputy Governor RBI

Union Finance minister Mr Pranab Mukherjee adds “ BHARAT NIRMAN has made a substantial contribution to the up-gradation of rural infrastructure through its various programmes”

The above statements by such high profile people clearly speaks of the magnitude of the work being undertaken and we at FINO are proud to be a part of the scheme of things. This also defines the mood that is there with in FINO and we are not stopping at that. This is a great milestone for us. In order to celebrate our success of reaching 1.5cr people we are hosting a function in Delhi on June 15th. Below are the event details

Event Details

Venue:
Stein Auditorium,
Habitat World,
IHC Lodhi road,
New Delhi-110003

Date: 15th June 2010
Time: 1pm - 1:45pm followed by lunch
Chief Guest: Union Finance Minister, Mr Pranab Mukherjee.

Guest of Honor :Deputy Governor RBI, Dr KC Chakraborty

RSVP:
1. Amarjeet Kaur :(amarjeet.kaur@fino.co.in)
2. Kanika Tiwari : (Kanika.tiwari@fino.co.in)

We are delighted to have such dignitaries as part of our event. Well keep you posted on all the happenings around the event. Cya and Happy reading Koshish blog

A quick glimpse of events that FINO participated across India recently

• First NREGS disbursement in Karnataka, March 2010

On 20th March 2010, FINO became the first service provider in Karnataka to do NREGS disbursements through smart cards as part of Electronic Benefit Transfer (EBT) scheme under One District One Bank model. The first disbursements were done at Yalivala village in Kundagol taluk of Dharwad Dist where the pilot project is being implemented along with Axis Bank.
The occasion was graced by Rural Employment & Panchayat Raj Minister, Mr. Jagadish Shettar. Lead Bank manager G S Basavarajappa, Dharwad ZP-CEO Shikha S, local MLA S I Chikkanagoudar, , and officials from Axis Bank were also present. As an extension to the function, the FINO technology and its benefits were explained and demonstrated in detail to the villagers.
“The initiative would solve the problems like delayed payment of wages and intervention by middlemen under the NREGS scheme.” – Jagadish Shettar, Rural Employment & Panchayat Raj Minister.

• FINO at RBI Platinum Jubilee Celebration, Bangalore, March 2010
FINO participated in the RBI Platinum Jubilee Celebrations at Bangalore on March 22nd chaired by RBI Governor and Deputy Governor. The discussion was focused on the “Importance of financial literacy in Rural Areas” and educating them from school level itself.
A wide range of FINO’s enabling technologies like Mobile enrolment kits; Laptop enrolment kits, client database etc were kept on display at FINO’s stall during the event. FINO’s MDM machine was also a special attraction at the stall. Overall the stall got a good response from the bankers and other reputed industry people including The Regional Director-RBI, GM and CGM, SBI and other senior level people from industry bodies and banks like SLBC, NABARD, Corp Bank, ING Vysya, PNB, Axis Bank, State Bank of Mysore etc

• Rural Development Summit @ CII Summit in New Delhi, April 2010
FINO participated at the CII summit held at New Delhi in April 2010. The overall theme for the summit was India @ 75: Economy, Infrastructure and Governance and the event was held under the 2nd rural development summit.

Mr Nirmal Bansal , Director Business Development & Government Initiatives ,FINO and was a one of the Panelists during the panel discussion on the topic “Opportunities and scope of replication of innovative practices that benefit communities and service providers in bringing about financial inclusion.”

The session was chaired by Mr. Vijay Mahajan, Chairman, BASIX. The other panelists included Mr. Ajay Desai, Chief Financial Inclusion Officer, YES Bank, Mr. Jitendra ‘Sonny’ Sannon, Executive Director, TransNet FZC, Mr. Hemant Kaul, Managing Director & Chief Executive Officer, Bajaj Allianz General Insurance Company Ltd.

Let me begin with the findings of the research by Scotch Development Foundation it says “only 11% of the no frill accounts opened between the periods April 2007 to May 2009 is operational. “ Such a huge gap between the total accounts created and ‘active accounts’ raises the critical question about the efficacy of the national agenda of Financial Inclusion itself.

In my opinion the deeper question that need to be addressed are
1. Creating the supply of services related to financial aspects for the unserved, alongwith
2. Need for a pragmatic demand creation too in alignment with the favorable policy climate and availability of an efficient delivery system.

As you would know that the delivery channel’s last level is the Business Correspondent (BC) who is the actual point for all financial services delivery to the end customers. The last mile delivery of financial products will be directly proportional to the quality of this man power. Thus to improve the financial products selling the concentration should also be on “raising the abilities of the BC”.

The BC is the first point of local contact to the people. He needs to effectively resolve the inhibitions and issues of the people. Unless the BC is well educated in the aspects of banking he may not be able to handle financial advising even if it is in respect of issues such as opening of no frill account, taking a small loan etc.

Keeping this agenda on the frontline the Channel Empowerment and Management group (CEMG), a division of FINO, is vigilantly following capacity enhancement programs for the BC on the field. Comprehensive training for the BC’s includes training on the various aspects including

• Business aspects related to the financial products
• FINO technology
• Functional aspects
• Behavioral aspects etc

BC Functional Module Training

A BC is exposed to
• Banking concepts,
• Budgeting,
• Cash management etc
• The related to deliver counseling to the customers.

BC Behavioral Module Training

The stress is on
• People management
• Selling skill-set building.

I feel that there is an underlying need to provoke the end customers (both in the rural and remote spaces) and to get them stream lined with the formal financial sources. Only then this will aid in enhancing the profitability to all stakeholders along with the customers and create a Win-Win situation for all.

In my next post I will provide insights about a few more things. Kindly keep watching this space!!

Success Mantra:
Convincing the customers and gaining their faith were one of the important hurdles that we managed to overcome. But, the next significant milestone was to boost the transaction volumes. Another hilltop to climb.

We figured out that many migrant labors queued-up at the bank’s counter to remit money. We analyzed the transaction volumes at various branches. The analysis leads us to a conclusion of “targeting these migrant workers”.

This helped us in two aspects:
• Ease in gaining customer’s faith
• Increase the customer base with comparatively less effort
UBI extended their support to us. We identified the branches with huge transaction volumes and deployed our agents to process remittance transactions of these migrant workers. This strategy showed the anticipated results.

Our transaction volumes, when plotted, showed an excellent increasing trend:

Technology Used:
The new customers acquired needed a biometric smart card to be able to transact. This conventional method demanded 3-7 days for activating a card. In contrast the target market segment needed speedy ways to transact. TAT was a very critical factor for converting the customers.

Technical experts came up with a smart solution to enroll the customer on-the-spot and also activate his card instantaneously. This solution involved enrolling the customer with the help of a mobile and a Point Of Sale (POS). On the mobile, the captured details were:
• Customer’s demographic details
• Customer’s Photograph
• Copy of the duly filled account opening form
Customer’s finger prints were captured with the help of POS. By using the GPRS facility, the customer details were directed to the server on a real time basis.

Customer Reaction:
The customers to be handled were of two. One was the direct customer of FINO i.e. the Bank and another was an indirect customer i.e. the end customer.

Since the intra bank remittance transactions happened in huge numbers inside the Bank, they had a tough time to manage this crowd. Also, most of the customers opting for intra bank transfers belonged to the labor class. Therefore, the bank was more than happy to do away with this crowd. Tremendous support was received from the bank official as it was a win-win situation.

They also appreciated the support extended to them whenever they needed it.

Factors Effecting End Customers:
 The most important factor for the end customers was saving time during the peak hours.
 Adhering to the money transfer TAT.

The new customers needed a biometric smart card to be able to transact. The first transaction of the newly acquired customer took a bit longer, as it involved the enrollment process. Next transaction onwards, money transfer was just a matter of few seconds.

Also, by meeting the TAT for 99.99% transactions, the customer’s confidence was regained. Percentage of repeat customers was the unit for measuring the customer satisfaction. Customer satisfaction is directly proportional to the no. of repeat transactions. The repeat customers based on this criteria were measured and the outcome is as follows:

The average no. of repeat customers, in both the cities where we launched remittance, was 47.5%. In the initial phase, this is certainly a reasonable no.

A thorough analysis was made on the potential remittance corridors across the country. The analysis involved a quantitative survey of the migrant population in various regions. These people had to leave their home towns in search of livelihood. They moved their base to an urban or semi-urban place where they could find some means to earn their living.
The migrant class typically involved small vendors, auto rickshaw drivers and taxi drivers. For the survey, the identified set of people had to answer a simple set of questions that would help us identify the remittance patterns. The outcome of the survey met our expectations and helped us create a strong business case for the huge demand for remittance. Indeed there is an immense demand for remittance among the migrant workers.

Whether to believe or not to?
“Tatkaal” a tailor-made product was launched for the migrant workers. Though there was a need for such a product, rolling-out the product wasn’t all that easy. Convincing the customers to use a totally new formal remittance channel was a major challenge. Due to lack of awareness amongst this class of customers, they had a lot of apprehensions about this new channel.

The people to whom the services was offered had a common concern “Kaise vishwas karen ki humara paisa gaon pahunch jayega? Agar paisa nahi pahuncha to hum kis se poochenge?” (How do we trust you that our money would reach the home town/ destination? In case it isn’t delivered, whom should we approach?). The problem was that that these people had a very conservative thinking and only trusted the proven methods/ channels.

They were very afraid to try out a new approach, especially because money was involved. They were convinced by explaining the way it operated. FINO existed with a sole purpose of serving the un-served. Their concerns about the authenticity of the transactions were clarified.

Security: A big concern:
The customers were concerned about the security. They were taught about the security aspect of the biometric cards. Since there is a high probability of the beneficiary being illiterate, the chances for fraudulent transactions increase. It might happen that the channel they use could deliver partial amount to the beneficiary, without his knowledge.

So, the customers were educated about the secured biometric transactions. Money is remitted through a biometric card with minimal manual intervention. The entire process is absolutely transparent and is within the RBI guidelines. Since these are biometric cards, transactions can be initiated from the card only after finger print verification. It is therefore one of the most secured modes of transaction.

Will they continue to remit?
Another challenge was to ensure that the person, who did one remittance transaction, does the subsequent remittance transactions also. Initially, these customers were a bit hesitant, even if their earlier transaction(s) was successfully processed. Agents were in touch with these customers and provided them a doorstep service for the subsequent transactions.
Now, the customers have full faith in FINO and are also comfortable with operations model. Another checkpoint crossed.

Effort and Support:
 With the continual support from UBI, the code was cracked and succeeded in changing the mindset of the customer.
 Gradually, the customers started trusting the agents and the transaction graph showed a remarkable improvement.
 Successful processing of transactions on a day-to-day basis was a major factor to help gain the customer’s confidence.